Blog post

Quick take: A federal judge in Texas just said the government can’t enforce a big FBAR penalty without first giving you a jury trial. At the same time, an appeals court recently ruled that some FBAR penalties can be unconstitutionally excessive. This is a meaningful shift for real people with foreign accounts—not just a technical fight for tax pros.

First, a 60-second refresher: What is the FBAR and why do penalties get so large?

If you’re a U.S. person and your non-U.S. financial accounts total over $10,000 at any time during the year, you must file the FBAR (FinCEN Form 114). Penalties for missing or botching this can be steep—especially if the IRS believes the miss was “willful.” In willful cases, the penalty can reach the greater of $100,000 or 50% of the account balance per year.

What just happened?

• Jury-right ruling (Texas): In a case reported by Forbes, a federal court said the government violated the Seventh Amendment by trying to collect a seven-figure FBAR penalty without giving the taxpayer the right to a jury trial. In short: before the government can lock in a major civil penalty like this, a jury may need to be involved. Source and Bloomberg Tax coverage: Source.
• “Excessive fines” ruling (Eleventh Circuit): An appellate court recently held that some FBAR penalties were excessive under the Eighth Amendment, signalling courts won’t rubber-stamp penalties that are wildly out of proportion to the underlying omission—particularly for smaller accounts. Helpful overview: Source.

Why this matters if you’re a client (not a tax professional)

• New defences are opening up. If you’re facing large FBAR penalties, you may now have constitutional arguments—jury-trial rights and “excessive fines”—that can reduce or even block what the government seeks to collect.
• Proportionality matters. Courts are looking harder at whether the penalty fits the “harm.” When account balances are modest, six- or seven-figure penalties are more likely to be questioned.
• Willful vs. non-willful still drives outcomes. Evidence that you tried to comply, relied on professional advice, or simply made a good-faith mistake can be crucial. On the other hand, concealment or ignoring clear instructions still points to willfulness.
• Process counts. Notices, your chance to respond, and whether you’re afforded a jury can affect results. These rulings emphasize procedure, not just numbers.

What this likely means next (our informed view)

• Appeals and possible Supreme Court attention. Expect the government to appeal the Texas jury-right decision. With different courts taking different views on FBAR penalties, the Supreme Court may eventually weigh in again.
• More settlements and calibrated penalties. To avoid litigation risk, the government may be more open to negotiating penalties that reflect the size of the accounts and the taxpayer’s intent.
• Clearer guardrails over time. We may see tighter standards around when a case is “willful,” when a jury is required, and how to measure what’s “excessive.” For clients, that means less uncertainty and—potentially—fairer outcomes.

What you should do now

• Don’t panic—but do assess. If you’ve missed FBARs or think past filings weren’t complete, let’s quantify the risk. We’ll look at balances by year, filing history, and your “story” (what you knew, what advice you got).
• Document your good faith. Keep emails with prior advisors, drafts, and any notes that show you were trying to comply. That evidence can shift a case from “willful” to “non-willful.”
• Consider strategic options. Depending on your facts, options may include late filings, amended filings, or negotiating a reduced penalty—now with stronger constitutional arguments behind you.
• Get professional help ASAP – Cross-border issues including FBAR filings can be very complex and require help from a competent professional. Always make sure to hire great representation whenever you’re dealing with these matters.

The bottom line

FBAR penalties are still serious, but the landscape is changing in your favour. Courts are pressing the government to respect your right to a jury in big-dollar cases and to avoid penalties that don’t fit the facts. If you have foreign accounts and any doubt about past FBARs, this is a good moment to review—and, where appropriate, push back.

Further reading for context:
Forbes (jury-trial ruling),
Bloomberg Tax (Texas decision),
Journal of Accountancy (excessive fines).